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Coach's Playbook Posted by Team Topstep December 11, 2020

Day Trading With Stops - The Coach’s Playbook

An old adage among day traders is that “you should always know where you’re getting out of a trade before you get in.” Having an entry and exit strategy before you initiate a position is beneficial for managing risk. It also puts you in a situation where you’re a lot less likely to become emotional about a trade. And, as most of us know, trading on emotion can be the kiss of death for an undisciplined trader. 

Stop-loss orders are among the most commonly used tools by traders to manage risk and reduce emotional attachment to a trade. Stop orders exist to prevent disaster. Consider them a fail-safe. Not every position you put on is going to be a winner. It’s essential to recognize when a trade has reached a point of invalidation and act on it; the sooner, the better. Getting out of bad trades before they turn into catastrophic trades is the most significant benefit of placing stops. 

Funded Trader Shoutout

This week’s Funded Trader shoutout goes to none other than Asha S., who put up an impressive $3,300 day trading the S&P 500 futures. As stocks continue to melt up, this is another example of how it pays to be on the right side of a trending market.

On another note, are you driven by the ambition of being featured in the holy grail of trader acknowledgments? Do you race to this article each week hoping to find your name on the coveted “Funded Trader Shoutout” list? The best advice we can give to those of you champing at the bit for recognition is to remain consistent and don’t lose sight of your trading goals. If you find yourself in need of a little extra inspiration, not to worry; we’ve got you covered.

Relax and join Clinical Psychologist and active trader Dr. Andrew Menaker and Topstep’s Senior Performance Coach John Hoagland after the markets close on Wednesday, December 16, when they will discuss How The Need For Perfection Can Impact Your Trading. Stick around after the discussion for a Q&A session where Hoag and Dr. Menaker will field all of your questions.

When To Place a Stop Order

The Topstep coaches recommended having a stop-loss order in place for every position you have on. In fact, the Topstep risk managers require that all Funded Traders maintain stop-loss orders for their open positions. 

Like Mick says in the video above, it’s unnecessary to use a bracket order on every trade you make, but you shouldn’t hold a position for too long without having a fail-safe in place. As long as you know where you should be exiting a trade, it’s reasonable to hold a “mental stop” until you get close to that level. However, the problem with mental stops is that emotional traders tend to manipulate them as the market moves closer to their exit price. So play it safe and put that stop order in ASAP.

Where To Place Your Stop

If you’ve been trading for a while, chances are you can look at a chart and have a pretty good idea where a lot of stops are resting. When you’re able to identify chart patterns and potential trade setups, it becomes fairly obvious where the textbook stop levels are. Knowing where the pressure points are for other traders is valuable information and can be used to your advantage.

Suppose you assume that the market will stop most retail traders out of their positions before the anticipated move occurs. In that case, you can adjust your entry price accordingly. Of course, there’s no guarantee that your trade will do any better than anyone else’s, but you will be putting yourself at a significant advantage in terms of risk optimization.


A fundamental rule of futures trading is to never add to a losing position. Bad trades tend to get worse if you let them. You will always be better off by exiting a lousy trade then stepping back to re-evaluate your strategy.

Trade Well!